Homebase value set to be slashed

Argos-owner Home Retail Group will this week slash the book value of its
Homebase DIY chain by up to £600m due to the declining retail market.

By James Hall, Retail Editor

10:08PM BST 18 Oct 2008

The carrying value of the chain on Home Retail’s books stands at just under £1bn. That will be cut to between £300m and £400m, The Sunday Telegraph has learned.

Home Retail Group

News of the write-down will come when Home Retail reports its half year results on Wednesday. It is expected to report half year pre-tax profit of £121m, down 19 per cent from £149.8m last year.

Home Retail said last month that it expected an assessment of the carrying value of Homebase’s assets to lead to “substantial write-downs’’ in its value. Analysts said the book value of Homebase could be cut from just under £1bn to between £100m and £300m. However, after the detailed assessment, the value will top these forecasts.

When the review of Homebase’s value was announced last month Home Retail’s chief executive ,Terry Duddy, said that the entire retail sector had been downgraded by the City, and so it follows that Homebase’s assets are written down, too.

The DIY market had been “terrible’’ since 2005, and there is a more bearish view of the market for the next few years, he said. Homebase’s management had done a good job throughout the period. “I don’t need a management change, I need a market change,’’ he said at the time.

All retailers who sell home-related goods are suffering. DIY, furniture, carpet and electricals chains are all feeling the pain following a sharp slowdown in consumer spending and the housing market. Retail observers fear that the sector will suffer even more next year.